Strangle Strategy

Strangle Strategy

Strangle Strategy

To make it cheaper to execute the option strangle is the slight modification of the straddle. A strangle can hold both the call and put options within the same underlying asset and the same expiration date. Strangle is cheaper than the straddle because strangle can buy or sell both the call and put option at the Out-of-the-Money Strike price. It is useful when the market moves in one direction either upside or downside.  (more…)
Hedging in Financial Markets

Hedging in Financial Markets

Hedging in Financial Markets

Hedging normally happens everywhere. For example, when you’re buying homeowner's insurance, you are hedging or protecting yourself against a variety of unforeseen disasters like fires, robbery, etc. To reduce the risk while investing, all individual investors, portfolio managers, and corporations use hedging techniques. However, hedging in financial markets is not as straightforward as paying an insurance company an annual fee. (more…)
American vs European options

American vs European options

American options vs European options

An option is a right, but not an obligation to buy(sell) an option that is derived from the underlying asset (Stock, Commodities, Currencies, Indices) at a certain price and a certain date (more…)
Lookback Options

Lookback Options

Lookback Options

Exotic options are options that have complex features than generally traded vanilla options. They have several triggers that determine their payoff. Lookback options are types of exotic options where the payoff depends on the maximum or minimum price of the underlying asset over the life of the option. (more…)
Exotic Options

Exotic Options

Exotic Options

Options are versatile financial products. Options are a type of derivative that derives their value from the value of the underlying asset. An option contract is a financial contract that gives the investor an opportunity to buy or sell an asset at a pre-determined price at a specific date. Options are of two types: call option and put option. The call option allows the investor to buy the asset and a put option allows the investor to sell the asset at a specific price on a specific date. Every options contract has an expiry date by which the holder must exercise the option. (more…)
Barbell Strategy

Barbell Strategy

Barbell Strategy

Options are a conditional derivative instrument that allows the buyer of the contract to buy or sell a security at a chosen price. Option buyers are charged an amount called a “premium” by the sellers. Options are divided into “call” and “put” options. In a “Call” option, the buyer of the contract purchases the right to buy the underlying asset in the future at a predetermined price called the exercise price or strike price. In a “Put” option, the buyer acquires the right to sell the underlying asset in the future at a predetermined price. (more…)
Asian Option

Asian Option (words<500)

Asian Option

An Asian option is a type of option in which the average price of the underlying asset over a period of time dictates the payoff of the option. It is different from the American or European option as in these options, the payoff depends on the price of the underlying asset at a particular point in time. They are also known as average value options.

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Cash and Carry Arbitrage

Cash and Carry Arbitrage

Cash and Carry Arbitrage

Arbitrage is a practice of taking benefit of price differences between two markets. A market-neutral strategy that combines purchasing of a long position in an asset such as stock or commodity and the sale of a position in the futures market on the same underlying asset is known as cash and carry arbitrage. In Cash and carry arbitrage, a trader takes the benefit of price differences between an asset and its derivative in different markets. (more…)
European Options

European Options

European Options

When an investor has the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date, it is known as a stock option. There are two types of options: the put option which is a bet that a stock will fall, or the call option which is a bet that the price of a stock will rise. (more…)